UK: My Top Ten Tips For Understanding UEFA Financial Fair Play

I thought it would be useful with Financial Fair Play (FFP)
entering into mainstream football discussion to briefly set out my
top ten tips to help understand the key concepts.

1. The FFP regulations not only ensures that clubs break-even.
They cover a wide range of licensing conditions which are overseen
initially by national football associations. Such requirements
include ensuring clubs pay their debts in a timely manner.

2. UEFA FFP relates only to Champions League and Europa League
club participation, and not to domestic league participation. A
wide variety of clubs (through the European Club Association) were
consulted by UEFA over many months. The regulations have been
drafted and implemented with the consent of the clubs. The Football
League (FL) has just implemented its own version of FFP for the
Championship and the Premier League (PL) is currently discussing
various cost saving measures.

3. All clubs wanting to play in UEFA competition must submit the
required licensing documentation to the relevant national football
association (and for break-even purposes to UEFA). UEFA, through
its newly constituted Club Financial Control Body (CFCB) has the
power to conduct club audits and ask further questions to ensure
FFP compliance. If the Panel believes that the FFP rules have not
been correctly followed, it has the disciplinary power to sanction
clubs in breach. It should be noted that FFP is already in action
and has allowed UEFA to sanction a number of clubs including
Malaga.

4. The FFP break-even rules are to ensure a club, more or less,
has to balance its books. From the 2013-14 season, the UEFA
licence requirements will include adherence to the FFP break-even
rules. Until the 2013-14 season, there are no sanctions for
breaching the FFP break-even rules.

5. The FFP break-even rules will start to bite from the 2013-14
season. The rules need to be borne in mind however from the 2011-12
season onwards because the 2011-12 and 2012-13 season accounts are
used to determine a club's licence application in the 2013-14
season.

6. Acceptable deviation is the term used to describe break-even.
Acceptable deviation allows clubs to pass the FFP break-even test
without actually breaking even. The acceptable deviation provisions
allow a club with some losses over a certain number of seasons to
'break even' and therefore pass the FFP regulations. The
below table sets this out.

7. The table shows that the acceptable deviations (i.e. losses)
vary quite considerably. The first point to stress is that if an
owner does not put any money into a club by way of cash for shares,
each club's acceptable deviation (loss), by reference to the
last column in the table, is a mere €5m over three years (i.e.
€1.3m per season).

8. For the 2013/14 season when the FFP rules come into force, an
owner can inject up to €45m over two seasons to cover the
losses of the club. After the 2013-14 season an owner can on
average exchange only €15m worth of cash for shares each year
to spend on transfers and wages. That figure is reduced to
€10m per season (€30m over three seasons) for the 2015-16
season. Should a club wish to pass the FFP break-even requirement,
and it makes for example a €35m combined loss for the first
monitoring period (13-14), the owners will have to inject €35m
worth of equity into the club. If they do not, that club will
breach the rules.

9. The FFP rules promote investment in a club's stadium,
training facility infrastructure and youth development schemes by
excluding such costs from the break-even calculation.

10. The CFCB has the power to sanction clubs for breaches of the
FFP rules. Such sanctions include a reprimand, a fine, withholding
of prize monies, points deductions, refusal to register players for
UEFA competition, reducing a club's permitted squad size,
disqualification from competitions in progress and/or exclusion
from future competitions. Recently, UEFA has taken the ultimate
sanction and banned Malaga (because of their overdue payables
breach) from future competition should they qualify for UEFA club
competition in the next four seasons.

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